Nokia, once the world's biggest mobile phone maker, on Thursday posted a net profit of 202 million euros ($269 million) in the fourth quarter, its first quarterly profit for 18 months.
The beleaguered company, which is trying to cut costs, said that it would not pay a dividend to shareholders for the first time in more than 20 years.
"We are very encouraged that our team's execution against our business strategy has started to translate into financial results," chief executive Stephen Elop said in a statement.
In the three months ending December 31, Nokia made a net profit of 202 million euros compared to a loss of 1.07 billion euros in the same quarter a year ago, when results were hit by a goodwill impairment charge in its Location and Commerce unit.
An average of 11 analysts polled by Dow Jones Newswires had expected a fourth-quarter net loss of 156 million euros.
Net sales fell 22 percent to 8.04 billion euros, which was slightly lower than expected.
Shares in Nokia soared earlier this month when it revealed an eight percent increase in fourth quarter sales in its Devices and Services unit to 3.9 billion euros.
The company sold a total of 86.3 million devices during the quarter, including 4.4 million Lumia smartphones, its new flagship product developed with Microsoft.
Nokia said at the time that the numbers were better than expected. Still, net sales of smart devices fell 55 percent in the quarter to 1.2 billion euros on a yearly basis.
"The decline in our smart devices net sales in the fourth quarter 2012 was due to lower volumes partially offset by higher average selling prices," the company said.
Analysts took a mixed view on the results.
"Obviously we knew the results pretty well in advance but there were a couple of surprises, and I would say they were mostly positive," said Sami Sarkamies, an analyst at Nordea.
The company's net cash position stood at 4.4 billion euros, compared with 3.6 billion euros at the end of last quarter. That was better than expected, Sarkamies said.
At 18 percent, the gross margin in smart devices was also above expectations, he added.
Another analyst, Mikael Rautanen from Inderes, struck a more bearish note, arguing that it was too early to say whether the results signalled a turnaround since much of the profit came from Nokia Siemens Networks and from cost cutting.
"Looking at the sales development and shipments of Lumia devices, there are not yet any signs of a turnaround," he said.
Nokia dominated the international mobile market for more than a decade but has of late lagged behind smartphone rivals such as Apple and Samsung, and credit rating agencies have downgraded the company due to concerns over its profitability and its cash position.
Elop was hired in 2010 to turn the company around and has bet the company's future on its alliance with Microsoft.
To bolster its cash position, Nokia has sold assets including luxury handset maker Vertu and the group's headquarters in Espoo outside Helsinki.
In December, it withdrew all its lawsuits against BlackBerry maker Research in Motion (RIM) after the Canadian company paid its Finnish rival 50 million euros to settle a patent dispute relating to WLAN local area network technology.
Shares in Nokia were down by 8.26 percent at 1400 GMT on the Helsinki market, which was trading 1.73 percent lower.